LIC Housing Finance (Q2’11 Result Update)

LIC Housing Finance Ltd (LICHFL) continued with its stellar performance in Q2’FY11
BUY by posting 53.2% growth in Net Interest Income (NII) and 32% growth in PAT on YoY
Market Data basis. The key catalysts behind this strong numbers were stable margins and a robust
Current Market Price (INR) 1353 growth in disbursements of 36% YoY. The credit quality continues to impress with
GNPA & NNPA stands at 0.7% and 0.2% respectively.
Target Price (INR) 1444
Upside Potential ~6.7% Growth in loan portfolio remains strong
52 Week High / Low (INR) 1496/558
Market Capitalization (In INR Mn) 11967.4 LICHFL’s loan book grew by 36% YoY and 8.5% on a QoQ basis backed by a strong
growth in disbursements which grew by 34.1% YoY and 50% QoQ. 70% of the
Share Holding incremental growth in individual disbursements came from the “Advantage 5” product.
Individual Promoter  The project/ builder loan disbursements grew by 243% sequentially. Currently the
10% &  builder portfolio contributes to around 11.8% of the total portfolio.
Promoter 
Corporate  group
bodies
3%
37% Margins came off a bit, but on expected lines

During Q2’FY11, the company’s cost of funds rose by 10 bps to 7.91%, which was on
expected lines . The yield on advances remained at 10.05%. Consequently, NIM dipped
marginally by 8bps to 2.93%. We are expecting a 15 bps reduction in margin. We
Institutions believe, LICHFL’s recent hike in PLR (by 50bps) could enable the company to maintain
50%
margins at ~3%.

STOCK SCAN Asset Quality remains strong, further improvement looks difficult
BSE C
Code
d 500253
LICHFL’s GNPA & NNPA has improved from 0.9% & 0.4% last quarter to 0.7% & 0.2%
NSE Code LICHSGFIN for Q’FY11 respectively.
Bloomberg Ticker LICHF.IN
Reuters Ticker LICH.BO Valuation
Face Value (INR) 10
LICHFL is currently trading at a P/BV of 2.56 on a FY12 BV of 524.4. It has already
reached our target price of INR 1444 and came down on aggressive profit booking. The
Equity Share Capital (INR. Mn.) 949
stock looks attractive for longg term investments.
Average P/E/PBV 8.61/1.81
Beta vs Sensex 1.18
Particulars (in INR Mn) 2008 2009 2010 2011E 2012E
Average Daily Volmes (6 M) 933190
Total Income 5,802.00 8,642.66 10,678.89 14,582.44 18,985.02
Dividend Yield (%) 1.28
Growth 36.7% 49.0% 23.6% 36.6% 30.2%
Stock Return (1 Yr) 78%
NII 5,539.40 7,310.36 8,869.39 12,111.10 15,876.66
100.0 Growth% 40% 32.0% 21.3% 36.5% 31.1%
80 0
80.0
Net Profit 3,861.60 5,074.19 6,582.88 8,243.22 10,576.33
60.0
40.0 Growth% 38.4% 31.4% 29.7% 25.2% 28.3%
20.0 EPS 45.47 59.70 69.29 86.77 111.33
0.0
P/E 29.54 22.50 19.38 15.48 12.06
‐20.0
NII% 2.85 2.95 2.7 3 2.8
ROE 22.80% 22.4% 19.1% 20.0% 21.2%
LIC Housing Finance Ltd.close Sensex
NIFTY
GNPA% 1 70
1.70 1 07
1.07 0 69
0.69 0 67
0.67 06
0.6
NNPA% 0.64 0.21 0.12 0.11 0.1
Analyst: Abhisek Sasmal
BV 199 256 352 432 524.38
Email: asasmal@microsec.in P/BV 6.75 5.25 3.82 3.11 2.56
Ph No: 033-3051-2100 Source: Company, Microsec Research

18th October’ 2010 Microsec Research

 Key Performance Indicators

Q1'09 Q2'09 Q3'09 Q4'09 Q1'10 Q2'10 Q3'10 Q4'10 Q1'11 Q2'11
Loan Book (Rs Bn) 228 241 253 277 293 319 342 381 400 433.85
Growth % 6.3% 5.7% 5.0% 9.5% 5.8% 8.9% 7.2% 11.4% 5.0% 8.5%

Q1'09 Q2'09 Q3'09 Q4'09 Q1'10 Q2'10 Q3'10 Q4'10 Q1'11 Q2'11
Loan Sanction (Rs Bn) 18 29 26 35 35 54 45 46 53 76.67
Growth % 61.1% -10.3% 34.6% 0.0% 54.3% -16.7% 2.2% 15.2% 44.66%

Q1'09 Q2'09 Q3'09 Q4'09 Q1'10 Q2'10 Q3'10 Q4'10 Q1'11 Q2'11
Disboursement (Rs Bn) 15 22 19 31 24 38 36 51 34 51
Growth % 46.7% -13.6% 63.2% -22.6% 58.3% -5.3% 41.7% -33.3% 50.00%

Q1'09 Q2'09 Q3'09 Q4'09 Q1'10 Q2'10 Q3'10 Q4'10 Q1'11 Q2'11
Disbursement/Sanction 74.0% 75.9% 73.1% 88.6% 68.6% 70.4% 80.0% 110.9% 64.2% 66.5%

% mix in Loan book Q1'09 Q2'09 Q3'09 Q4'09 Q1'10 Q2'10 Q3'10 Q4'10 Q1'11 Q2'11
Individual (%) 94 94 93 91 91 92 92 89 90 88.7
Builder (%) 6 6 7 9 9 8 8 11 10 11.3

Q1'09 Q2'09 Q3'09 Q4'09 Q1'10 Q2'10 Q3'10 Q4'10 Q1'11 Q2'11
Spread % 1.9 1.75 2.06 2.05 1.83 1.65 1.95 2.36 2.24 2.13

INR Bn Q1'09
Q1 09 Q2'09
Q2 09 Q3'09
Q3 09 Q4'09
Q4 09 Q1'10
Q1 10 Q2'10
Q2 10 Q3'10
Q3 10 Q4'10
Q4 10 Q1'11
Q1 11 Q2'11
Q2 11
Loan Sanctions 17.87 29.48 26.25 35.39 35.33 53.65 45.16 46.29 53.83 76.67
Individual 14.84 21 15 30 28.54 44.27 27.96 40.74 36.54 56.94
Project Loans 3.03 8 11 5 6.79 9.38 17.2 5.55 16.94 19.73
Loan Disbursed 15.2 21.59 19.44 31.43 24.3 37.57 36.04 50.62 33.92 51
Individual 14.18 19 16 25 22.8 33.88 29.95 37.86 30.18 38.2
Project Loans 1.02 3 4 6 1.5 3.69 6.09 12.76 3.74 12.83

Asset Quality Q1'09 Q2'09 Q3'09 Q4'09 Q1'10 Q2'10 Q3'10 Q4'10 Q1'11 Q2'11
GNPA % 2.2 1.85 1.69 1.07 1.51 1.28 1.44 0.69 0.9 0.7
NNPA % 1.15 0.87 0.73 0.21 0.65 0.62 0.77 0.12 0.4 0.2
Provision Cover % 51 57 56 81 43 51.6 46.5 82.4 61.9 71.8

Source: Company

18th October’ 2010 Microsec Research

 Quarterly Analysis

INR Mn Q2'11 Q2'10 YoY% Q1'11 QoQ%

Interest earned 11021 8349 32.0% 10109 9.0%

Interest expense 7423 6000 23.7% 6834 8.6%

NII 3598 2349 53.2% 3275 9.9%

Other Income 645 544 18.6% 322 100.3%

Total Income 4243 2893 46.7% 3597 18.0%

Operational expense 503 552 -8.9% 394 27.7%

Gross Profit (ppp) 3740 2341 59.8% 3203 16.8%

Provisions 3 -418 -100.7% 89 -96.6%

PBT 3737 2759 35 4%

35.4% 3114 20 0%
20.0%

Tax 848 566 49.8% 773 9.7%

PAT 2889 2193 31.7% 2341 23.4%

EPS 24.7 20 23.5% 22.2 11.3%

Income Statement Spread Analysis 2009 2010 2011E 2012E

in Mn 2009 2010 2011E 2012E Avg yield on earning assets 11.33 10.28 10.8 11
Interest earned 27,476.47 32,826.66 45,999.54 62,194.43 avg cost of int bearing liabilities 8.25 7.67 7.8 8.2
Interest expense 20,166.11 23,957.27 33,888.44 46,317.77 Spread 1.94 1.95 2.24 2.05
NII 7,310.36 8,869.39 12,111.10 15,876.66 NIM% 3.08 2.61 3 2.8
Growth% 32.0% 21.3% 36.5% 31.1%
Other Income 1,332.30 1,809.50 2,471.34 3,108.36
Total Income 8,642.66 10,678.89 14,582.44 18,985.02 Growth% 2009 2010 2011E 2012E
Operational expense 1,398.22 1,583.49 2,805.88 3,868.20 Advances 26.20% 37.6% 30.4% 28.0%
Gross Profit (ppp- Pre Provision Profit) 7,244.44 9,095.40 11,776.56 15,116.82 NII 32.0% 21.3% 36.5% 31.1%
Provisions 221.77 20.4 233.4 300.5 PAT 31.4% 29.7% 25.2% 28.3%
PBT 7,022.67 9,075.00 11,543.16 14,816.32
Tax 1,948.49 2,492.12 3,299.95 4,239.99 Operating Metrices 2009 2010 2011E 2012E
PAT 5,074.19 6,582.88 8,243.22 10,576.33 Cost to Income 19.1% 17.9% 23.2% 24.4%
EPS 59.70 69.29 86.77 111.33 ROE 22.4% 19.1% 20.0% 21.2%
ROA 1.84% 1.73% 1.67% 1.68%

Asset Quality 2009 2010 2011E 2012E

Balance Sheet Gross NPA Ratio 1.07 0.69 0.67 0.6
in Mn 2009 2010 2011E 2012E Net NPA Ratio 0 21
0.21 0 12
0.12 0 11
0.11 01
0.1
Liabilities Coverage Ratio 81% 81.60% 70% 70%
Equity Capital 849.96 949.96 949.96 949.96 Gross NPA 2,961.68 2,627.62 3,328.11 3,814.54
Reserve & Surplus 21,776.40 33,478.46 40,203.97 48,866.01 Net NPA 581.26 456.98 546.41 635.76
Networth 22,626.37 34,428.42 41,153.93 49,815.97
Total Debt 253,266.94 346,689.44 452,492.07 579,384.01 CRAR Ratio 2009 2010 2011E 2012E
Total 275,893.30 381,117.86 493,646.00 629,199.99 Tier1 Ratio 10.2 11 11 11
Tier2 Ratio 4.6 4.4 4 4
Assets CAR% 14.8 15.4 15 15
Fi d A
Fixed Asset 482 99
482.99 495 44
495.44 554 52
554.52 614 98
614.98
Investments 11,484.60 14,331.59 18,522.86 23,736.18 Valuation Ratios 2009 2010 2011E 2012E
Housing loans 276,792.82 380,813.84 496,732.26 635,756.34 PE 22.50 19.38 15.48 12.06
Net Current Assets (12,867.10) (14,523.00) (22,163.64) (30,907.51) P/PPP 0.18 0.14 0.11 0.09
Total 275,893.30 381,117.86 493,646.00 629,199.99 P/BV 5.25 3.82 3.11 2.56

3 Source: Company, Microsec Research

18th October’ 2010 Microsec Research

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18th October’ 2010 Microsec Research